Property Owner’s Dilemma: How Much Should I Pay My Estate Agent?

should the landlord or tenant pay the property agent fees?
Hands with money and miniature house on a white background

This is really a head-scratcher. In Singapore, there are no fixed rules on how much you should pay your real estate agent, so it’s not surprising that many property sellers, buyers and tenants here are often uncertain on how much commission they should give, or should they even pay one in the first place.

Given that a property agent’s compensation is dependent on many things, even experienced sellers, landlords and lessees can become hard-pressed when trying to determine an appropriate fee to remunerate an agent for the services he rendered.

To help you, we crafted a comprehensive guide detailing the best market practices in paying an agent’s commission, whether you’re the property owner, buyer or tenant.

 

Two Categories of Property Agents

To get a better grasp over the compensation system for property agents in Singapore, we first need to be aware that there are essentially two kinds of estate agents.

Lessor or Property Seller’s Agent

This is the property agent hired by a landlord to look for tenants, or the one appointed by a property owner to search for a buyer. The responsibilities of this agent mainly consists of:

a) Searching for people who are interested in renting or buying the unit by setting up online listings across various websites, distribute flyers, put up ads or tap a property agency’s network of contacts.

b) Think of ways to make it easier to find an occupant or buyer, then execute these marketing strategies. These include taking stunning photos of the unit and assisting the owner in making the unit beautiful and presentable.

c) Show the unit to potential tenants and buyers, as well as coordinate and schedule the visits with the property owner.

d) Represent the property owner in the negotiating table. Under rules introduced by the Council for Estate Agencies (CEA), agents must look after the interest of their client. Another duty is to counsel the owner over the sales or rental process, especially if there are more than one party that is keen to purchase the unit.

e) Aside from handling all the necessary paperwork, make sure that the transaction complies with all legal and statutory requirements.

Agent of Tenant or Property Buyer

This is the real estate agent representing the lessee or the person who is interested in buying the property. The responsibilities of this agent include:

a) Look for properties that meet the requirements of the buyer or would-be tenant, as well as curate a list such houses.

b) Coordinate with owner or his agent so that client can see the property.

c) Represent the tenant/buyer in the negotiating table. Under CEA rules, agents must look after the interest of their customer. Another duty is to assist the client regarding the sales or rental process. Aside from providing professional advice, the agent must also help the costumer accomplish the necessary paperwork.

Also, property owner’s agent and sometime the lessee’s agent typically help the landlord or occupant if maintenance problems arise during the tenancy. However, please bear in mind that the agent is not required to do so.

 

Agent Prohibited from Serving both Landlord and Tenant

IMPORTANT: Please keep in mind that a property agent is not permitted to hold both roles in a single transaction as representing both property owner and buyer/tenant will lead to a conflict of interest.

Co-broking

Co-broking is a common industry practice in the property market, whereby two or more real estate agents representing the owner or the tenant/buyer work together in the same deal to achieve the best possible result for their respective costumers.

While the agents need to reach an agreement first on the co-broking fee, they still need to look after the interest of their respective client.

However, clause 1.8.3 of CEA’s Professional Service Manual prohibits an agent from collecting both compensations – commission from his costumer and the fee for co-broking from the agent of other party. Basically, the sharing of the commission is only permitted for deals wherein only one party obtains a commission.

For instance, in a property sale wherein only the seller’s agent receives a commission from his costumer, the agent of the acquirer is eligible to get a co-broking commission from the owner’s agent as the acquirer did not pay a commission.

But if the purchaser’s agent will be paid a commission from his customer, he is not allowed to get a co-brokerage fee from the seller’s agent.

 

Rental Transactions: Best industry practices for agent commission

According to several veteran property agents in Singapore, there are no standard or mandated rates on agent commission. Nonetheless, they were more than happy to share the best market practices that are based on rental amount and lease duration.

i. Two-year lease and rent is over S$3,500 per month

  • If there’s no tenant agent and the would-be occupant contacted the lessor’s agent by his own volition, the property owner should give a one-month commission to his agent. The tenant doesn’t pay any commission.
  • If there’s a tenant’s agent who helped the would-be occupant look for accommodations, and there’s also a landlord’s agent, both agents should equally split the one-month commission from the owner. The tenant doesn’t pay any commission.

ii. One-year lease and rent is over $3,500 per month

  • If there’s no tenant agent and the would-be occupant contacted the lessor’s agent by their own volition, the property owner should give a half a month’s commission to his agent. The tenant doesn’t pay any commission.
  • If there’s a tenant’s agent who helped the would-be occupant look for accommodations, and there’s also a landlord’s agent, the tenant and property owner should each pay half a month’s commission to their respective agent.

iii.Two-year lease and rent is ≤ $3,500 per month

  • Property lessor should pay a one-month commission to his agent.
  • Tenant should pay one-month commission to his agent. If a tenant’s agent was not involved in the transaction, the tenant doesn’t pay any commission.

iv. One-year lease and rent is ≤ $3,500 per month

  • Property lessor should pay half a month’s commission to his agent.
  • Tenant should pay half a month’s commission to his agent. If a tenant’s agent was not involved in the transaction, the tenant doesn’t pay any commission.

 

No Existing Rules on Agent Rental Commission

Please take into account that the above listed figures/practices may differ from actual commission rates, as the intricacy and urgency of a rental transaction will significantly impact the prices that a property agent will charge you. So it’s advised to come to an agreement first on the commission before officially appointing a property agent.

Moreover, if there is a disparity in the fees, would-be tenants and property owners should ask the concerned agent why the commission he is asking for does not match the aforementioned figures:

There are also cases where the property owner’s agent would insist on not splitting the rental commission as getting a tenant is not hard, as the unit is rare and there is strong rental demand, such as the case for heritage shophouses in prime locations

 

Property Sales: Best market practices for agent commission

The compensation for real estate agents who brokered a sale mainly depends on the type of property sold.

i. Non-landed private housing such as condominiums

  • Property owners typically pay a commission of two percent to his agent, but the rate can sometimes go as high as four percent.
  • The buyer doesn’t pay any commission, but his agent will get a share of the fee received by the seller’s agent.

ii. HDB flats sold in the secondary market

  • Owners of HDB resale units typically give a commission of two percent to their agents.
  • Buyers typically give a commission of one percent to their agents.

iii. Landed housing

  • Owner of landed homes typically gives a commission of two percent to his agent, sometimes greater. However, his agent has more room to negotiate due to the distinctness of the property.
  • The buyer doesn’t pay any commission, but his agent will get a share of the fee received by the seller’s agent.

 

Agent Sales Commissions May Increase

Just like with rental transactions, there are no black and white rules on the commission for property sales. However there are factors that may hike the compensation for agents such as:

a) Commissions given by the seller may likely increase if the property owner desperately needs to divest, needs to quickly dispose of the property, or it’s not easy to sell the property.

b) The acquirer’s agent may sometimes ask for a higher fee if they provided investment advice to help the buyer decide on whether to buy or not. The buyer’s agent may also demand a heftier commission if they are representing a foreign purchaser. Based on market talk, some agents working for Chinese nationals from Hong Kong and other parts of China are asking for commissions as high as five percent. In such cases, it is up to the seller if he is prepared to pay more to conclude the transaction.

c) There are instances when the agent wants the seller to agree to a tiered commission scheme, whereby the agent’s fee will increase if he manages to sell the property for a heftier price.

For instance, the seller will only obtain a commission of two percent if he sells the property within S$6 million, but if he manages to persuade the buyer to pay S$7 million, the owner will pay a higher commission of three or four percent.

 

Optional Design Features Offered by HDB

Meanwhile, the Housing and Development Board (HDB) offers a wide range of 99-year leasehold flats with various features to cater to the assorted needs of small and big families with dissimilar income levels. These dwelling are carefully designed to give quality housing to Singaporean families.

However, completed build-to-order flats (BTO) handed over to buyers are generally bereft of many important things that homeowners want in a comfortable and functional home. To address this, the Housing Board offers the Optional Component Scheme (OCS).

 

Optional Component Scheme

The OCS is a versatile elective scheme that buyers of new BTO flats can opt in for to ensure that their new flat is closer to move-in condition by the time the buyer takes vacant possession of the property.

However, the cost of such optional fittings will be included in the flat’s price tag, so make sure you have a sufficient budget for such features. In addition, OCS is not applicable to flats built using the Prefabricated Prefinished Volumetric Construction (PPVC) method, as these are already equipped with sanitary fittings, internal doors and full floor finishes.

 

Items available under OCS

The offered optional components vary per property type, with short-lease two-room flexi flats having the most number of elective fittings that can be installed. Please take note that the actual specifications may change.

 

Two-room flexi flat with short-lease

As these flats are intended to house the golden generation, HDB will install grab bars. The buyer may choose to add sanitary fittings and floor finishes to the unit. But if the owner opts for the elderly-friendly fittings, he needs to include the ‘other fittings’ as these needs to be set-up before the elderly-friendly fittings can be put up. Please see table below for details.

 

Optional ComponentSpecs
Sanitary fittingsWash basin with tap mixer
Shower set with bath/shower mixer
Floor finishesBedrooms
Living/dining room
Elderly-friendly fittingsBuilt-in wardrobe
Built-in kitchen cabinets (I) plus induction hob and cooker hood, kitchen sink and tap as well as dish drying rack
Other fittingsWater heater 
Lighting (entire unit)
Window grilles (entire unit)
Mirror and toilet roll holder in CR

 

Two-room flexi flat with 99-year lease

The below items are available for two-room BTO flats with full lease.

 

Optional ComponentSpecs
Sanitary fittingsWash basin with tap mixer
Shower set with bath/shower mixer
Floor finishesBedrooms
Living/dining room

 

Three roomers and larger flats as well as 3Gen units

The below items are available for 3Gen units and larger BTO flats such as three-room, four-room and five-room.

 

Optional ComponentSpecs
Sanitary fittingsWash basin with tap mixer
Bedrooms and bathroom doors
Shower set with bath/shower mixer
Floor finishesBedrooms
Living/dining room

 

Universal Design in HDB Housing Projects

HDB has been incorporating Universal Design (UD) features at its housing developments since 2006. Under this concept, a building’s design must be user-friendly to all, including children, the elderly and people with physical disabilities.

Universal Design in your flat

The Housing Board has added several user-friendly finishes and fittings in homes it constructed in the past including:

  • Water closets
  • Safer drying systems for clothes
  • Door handles and lever taps
  • Rocker switches installed at lower height

In newer BTO developments, it has integrated more user-friendly finishes and fittings like:

  • Adjustable bathrooms shower head
  • A bigger eye-viewer in the main door
  • Low height windows to allow more sunlight and provide better view
  • Ramps at the primary entrance, service yard and bathrooms for easier access
  • Unit layouts allow for convenient installation of elderly fittings like grab bars in the bathroom
  • Corridors and doorways as well as the common bathroom can accommodate wheelchair users

 

To get more guides like this, check out PropertyGuru

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